Why America Is Losing The Technology War

Foreign companies are years ahead of American corporations in taking advantage of our own innovations.

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My company, Baudex Corp., has the only significant new computer printer technology in this country, and the Japanese are negotiating to buy it. There's a chance they'll get it because no American corporation has made any offers. American venture capital companies are equally uninterested -- unless I'm willing to relinquish control. As for bankers, they haven't understood a word I've said to them. By the time our investment communcity wakes up, Baudex Corp. will have consummated business offshore and will be in production abroad.

For 30 years, I've watched the technology pioneered by our small companies find its way overseas. Our own big corporations just aren't interested in fighting for it. With top management's eyes fixed relentlessly on this year's bottom line, giant companies fail to notice breakthroughs engineered by this country's entrepreneurs.

It's not that our inventors don't try to sell their products. On the contrary, they expend a fair amount of effort knocking on the closed doors of corporate planners and shouting into the ears of bankers and venture capital people. Meanwhile, a Japanese technology intelligence corps is listening, looking, and moving fast, not waiting for inventors to seek them out.

Until very recently, I was standing outside the same closed doors.

The reason I can't get in has nothing to do with my credentials. I'm an inventor of many electromechanical devices and technological processes and improvements. In three stints with Bell & Howell Co. over 11 years, I was a production engineer, a special products administrator, and had hands-on responsibility for robot-type technology. I've also headed special project process development at Honeywell Inc., and developed fiber-optic drawing and alignment equipment for Armour Research Foundation. As a plant manager at Zenith Radio Corp., I helped increase color TV tube production by 65%, and while at AMF Inc., I worked on military pyrotechnics applications.

If my scientific and management credentials check out, so should my latest invention: a printhead for dot-matrix computer printers that can operate several times faster than current models.

It's just one-eighth the width of its competitors, allowing six cartridge printheads to be stacked side by side or one atop the other. This electronic method of accelerating print speed surmounts the perennial obstacle to highvelocity printing -- performance and maintenance problems from trying to speed up the carriage.

While this represents a giant step for the art of dot-matrix printing, American institutions with money to invest have taken little notice. All we could do at the start was turn out a number of engineering samples. We sold them fast: About 80% of our orders originat ed in Japan, Germany, Italy, and England. Of the few models we sold here, not all have even been put to the test. One big company spent 18 months trying to build a printer that's been stymied for lack of an electromagnet like ours. Unable to develop one to their own satisfaction, or get their legal department's approval to buy ours, the systems engineer on the project asked us for half a dozen samples. I sent them, but they were shoved in a drawer and lay there for six months. When I finally realized they weren't going to be used, I asked for them back.

That sort of runaround isn't unique. For example, one of the largest computer companies in the United States dickered with me for six months over the wording of a nondisclosure agreement. Only after we'd begun to get some publicity in high-technology circles did they accept my version of the agreement and propose to view a demonstration of my product.

Japanese companies don't share this hang-up. Their initial queries were quickly followed by visits. They asked lots of good questions, expressed real knowledge and interest, and, not long after, two companies made firm offers. One was prepared either to purchase Baudex or to buy an exclusive license to the technology for Japan. The other firm asked to buy an exclusive license for an equipment application in kanji, the traditional Japanese system of writing.

If the Japanese understand the attractiveness of this product, why don't our home teams?

American corporate planners are not often technical geniuses. Not many of them understand technology at all. Most simply plan according to a set of standards laid down by the corporation's president or policy committee. It's not very likely that technological breakthroughs will fit into these plans made solely in the light of short-term earnings statements.

Venture capitalists and bankers are worse yet. Lacking technical sophistication, their officials can only run down a canned list of questions. If I say to them, "I have something at this stage of development...," they stare at me with glazed eyes, just waiting for a chance to start in: "O.K., Matschke, what's your track record? How many units have you sold? How many will you ship in the first year?" It doesn't matter what you've got -- unless you've mastered a technique for turning plastic into gold -- all they care about is how many you've already shipped.

This is the problem of virtually every pioneering small company, or individual inventor, going to any source for capital. The easiest and cheapest way out is to go to a major firm and get "mothered." Arouse its interest in one aspect of your technology and you're set -- if you can accept the rest of it going down the drain.

An alternative, if you have an important contribution to make, is to let a venture capital company take you over and sweep up all the profits. They know very well how to size up a situation and get the most out of it for themselves, leaving you very little indeed.

Neither of these ways is for an old-timer like me. I started Baudex with $200,000 of my own money, and then got another $465,000 from business associates who bought limited partnerships. One investor was a scientist who put up some of his own money when he couldn't get his company to participate. Now, in addition to the Japanese connections, I'm negotiating a collaboration with a European firm that wants a license to manufacture and sell over there. That will net enough to expand production here, and to accept $5.5 million in orders from the first American industry to recognize the cartridge module's significance -- suppliers of pari-mutuel betting equipment. They're snapping up the initial production run, some of it for use here but a big portion allocated to Canada, Mexico, and England.

In my role as an entrepreneur and inventor, what I see in the system here is a frightening inertia. If we don't know what to do with the newest and potentially most valuable American technology, Japan and Germany do, and they'll reap the benefits of our innovations. We stand to be the losers, simply because our big companies and our investment community are light-years behind foreign companies in sensitivity to technology.

Our big institutions still have a little time left to wake up and give small company research and development the support to keep American inventions at home. As stockholders, as citizens, maybe we can sound an alarm that they will hear.